Millions of Americans can expect to get a refund from their insurance companies this year, at an average of about $80 dollars per family, thanks to a little-known Obamacare provision that’s helping people save money on their premiums. According to a new report released by the Health and Human Services Department on Thursday, Americans across the country have received a total of $1.9 billion dollars in rebates since this provision first took effect in 2011.
Obamacare’s medical loss ratio provision — which is also frequently referred to as the “80/20 rule” — requires insurers to spend at least 80 percent of every American’s premium costs on their medical care, rather than on the company’s own profits or administrative overhead. If insurance companies don’t hit the right balance, they have to issue a refund check to their customers to make up for it.
According to HHS’s calculations, 6.8 million Americans will save $330 million in refunds this year because of the 80/20 rule. Insurance companies are required to provide those reimbursements by no later than the beginning of August. Not everyone will actually receive a physical check in the mail; insurers are allowed to apply the reimbursements to future premiums, so the savings could show up that way.
In a press release announcing the new data, HHS Secretary Sylvia Burwell said that the health reform law is giving Americans a “better value for their premium dollars.” The whole point of the 80/20 rule is to encourage insurance companies to operate more efficiently and cut down on their overhead — and it’s slowly working. The portion of premium dollars allocated to insurers’ profits and administrative costs dropped from 15.3 percent in 2011 to 11.7 percent in 2013.
HHS estimates that if insurers weren’t making those type of changes, Americans would have likely paid about $3.8 billion in additional premiums in 2013. Altogether, since the medical loss ratio took effect three years ago, the administration calculates that it’s averted $9 billion dollars worth of unnecessarily high insurance premiums.
The 80/20 rule isn’t the only Obamacare provision that seeks to keep premium costs affordable. The health law also extends federal subsidies to help Americans purchase plans on the individual market in the new state-level insurance exchanges, something that allows millions of people to buy health care for less than $100 each month. However, under a lawsuit against the health law that could make its way up to the Supreme Court, those subsidies could be put into jeopardy in the majority of states in the country. If that happens, insurance premiums could increase by about 75 percent.